The State of Daily Deals

Roses and Sunshine, or Thorns and Storms?

The daily deal market might have lost some of its luster after the
digital world’s initial excitement, but by all accounts the state of the
market is strong.

Daily deals continue to provide value for merchants
who understand the intricacies of crafting a daily deal
and are willing to take a short-term risk for larger returns
over the long term. The fever pitch of criticism
that daily deal providers often face regarding their
business models and the business value of the deals
themselves, however, hasn’t waned.

That being said, consumers on the whole seem
pleased with the concept. But, alas, it’s not all roses
and sunshine.

Subscriptions to daily deal sites are down and that
could be seen as a pretty big problem. ForeSee Results
recently published research as part of its Holiday ERetail
Satisfaction Index that revealed that 60 percent
of respondents were enrolled in at least one daily deal
email program. That figure was down from last
spring’s 65 percent, and the 63 percent of subscribers
to daily deal emails that had actually purchased an
offer in the past 90 days was down from 67 percent a
year ago.

This could be attributed to a flood of vendors that
entered the market initially, as well as the variety of
out-and-out clones and specialist deal providers that
continue to make their way towards grasping even
the smallest slice of daily deal profits. As it stands
today, of course, Groupon and Living Social are dominating
the space. There is a big problem, however.

With 40 percent of respondents indicating they
do not subscribe to any daily deal providers, it is difficult
to know if that percentage is because it is still a
growing channel or if the market is still up for grabs.
Either way, this means that niche providers still have
a valid opportunity, particularly if they are able to differentiate
themselves in creative ways.

It’s not just about subscription rates, however. In
the end, what matters most is whether those subscribers
are buying — and in some respects, but not
all, they are. Fifty percent of daily deal subscribers
purchased from Groupon, but just half as many purchased
from Living Social — although purchases are
increasing for the Amazon-funded company, according
to the Foresee Results study.

What is disconcerting, however, is that 37 percent
have not purchased any offers whatsoever. Whether
this is because the right deal was not presented is unknown,
but the role that personalization and targeting
will play in the future will inevitably take center stage
in the coming years.

Redemption of daily deals is another hot topic.
According to the Foresee Results study, 90 percent of
buyers said they used (redeemed) at least one offer in
the previous 90 days. Breaking it down even further,
56 percent redeemed multiple offers while 34 percent
redeemed at least one. One question continues to
loom large in the minds of retailers, however: As purchases
and redemption rates rise, can daily deal sites
really help retailers translate their promotional dollars
into new business?

Three in ten respondents that redeemed a daily
deal had never conducted previous business with the
company and, what is more, 12 percent had never
even heard of the company prior to their daily deal
purchase. Twenty-six percent indicated they were infrequent
customers, leaving roughly 40 percent that
were already frequent customers.

So, as to the question of whether daily deals drive
new business, the answer seems to be a resounding...
“In some cases.” The good news is that purchases
from merchants spawned from daily deal sites actually
inspire repeat business — more than 90 percent of
shoppers reported making another transaction with
a merchant since redeeming an offer or planned to do
so in the future.

The state of the daily deal market on the surface
looks strong by most accounts. With room to grow
and technology available to improve the experience
of users and merchants, daily deals are here to stay.
But to remain a viable option, the daily deal market
needs continued innovation — innovation that increases
satisfaction for all interested parties.